State audit alleges fraud at Fire 12

Commissioners approve motion for legal counsel

Matt Baide | Sep 22, 20220

Mason County Fire District 12 officials misappropriated public money and broke state laws, according to an accountability audit and fraud investigation report by the state Auditor’s Office released Tuesday.

According to the fraud investigation report, the district misappropriated almost $70,000 in public money and $95,000 in unsupported expenses. State Auditor Pat McCarthy, along with other members of the state Auditor’s Office, attended the district’s regular monthly commissioners meeting Tuesday through Zoom to share the results.

“I am here to emphasize my own concerns about the issues we have found over the course of our audit and special investigations,” McCarthy said during the meeting. “I know it can be challenging to manage local government, but the issues we raised are all intended to serve your community. Our role in the state Auditor’s Office is to provide an independent, objective review of every local government in the state of Washington.”

A news release outlined the key findings of the state’s investigation, which include misappropriation and questionable payroll spending, credit card purchases and disbursements. Fire Chief pro tem Kelli Walsworth, former secretary Brenda Wilder and commissioner Albert Wilder benefited and were responsible, according to the findings.

The district has not reported or remitted quarterly payroll tax payments to the Internal Revenue Service since December 2018, according to the report. The district violated the state’s Open Public Meetings Act by failing to provide adequate notice of meeting dates and times, admitting members of the public to virtual meetings on time, if at all, and failing to have regular meetings as required by law, according to the release.

Other findings include: The district did not have a policy or adequate controls to monitor chief Walsworth’s use of a district vehicle to ensure she did not misuse it for personal use and failed to file annual financial reports with the state Auditor’s Office as required by law, according to the report.

The district’s noncompliance was partially due to nepotism, according to the report. Commissioner Albert Wilder is married to former secretary Brenda Wilder and their daughter, Walsworth, is the fire chief pro tem and was the fire chief. She’s married to Bryan Walsworth, a district volunteer. The report states there were no nepotism policies or set of controls to ensure family members could not appoint, supervise or discipline relatives and the commissioners trusted district employees implicitly and didn’t question or remedy the lack of district policies, controls or procedures.

The Auditor’s Office recommended the board take actions to correct the identified problems, including establishing a nepotism policy, obtain and safeguard sufficient documentation supporting all disbursements, including payroll, verify that disbursement and payroll transactions are properly calculated and allowable before approving them for payment, train staff responsible for processing payroll on policies and the proper recording of transactions, ensure that controls are adequate to identify all money due to the district and that staff deposit money into a district account in a timely manner.

The Auditor’s Office does not have authority to enforce corrections. According to the release, the Auditor’s Office recommended in May that the district file a police report about the potential loss of public money, but as of Aug. 17, the district had not filed a police report.

The reports have been sent to the Mason County Prosecutor’s Office and the Attorney General’s Office, according to the report.

Assistant Director of Local Audits Tina Watkins spoke at Tuesday’s meeting about the difficulties communicating with the district. Watkins attended the commissioner’s meeting in November to inform commissioners in person of the accountability audit.

“I would just like to share that this audit has been extremely challenging,” Watkins said during the meeting. “I’ve been around for about 28 years with the state Auditor’s Office and I rarely, if ever, have encountered, honestly, a more challenging engagement to connect with our client and make sure even our most basic requests are followed through on. I want to ensure you that throughout the entire engagement, we held weekly status meetings with one member of the board, not the full board of course, and the fire chief, and during those meetings, it was our mission to make sure that we were clearly communicating and asking for the information that we needed.

“Unfortunately, the district was unable to provide us with supporting documentation for our basic requests. We asked for items that are required to be maintained by state law and the majority of local governments that we work with are able to provide that information as part of their audit engagement and that would include the over 350 fire protection districts that we audit on a regular basis.

“Because of this, you will see, and we will explain today that we did resort to additional audit procedures to obtain information and that would include things such as reaching out to other local governments and also issuing subpoenas for certain records such as those from banks and other vendors as well.”

Special Investigation Program Manager Stephanie Sullivan presented the fraud investigation report to the attendees of Tuesday’s meeting. Assistant Audit Manager Megan McFarlane presented the findings of the accountability audit.

McCarthy wrapped up the presentation with a statement to the commissioners, referring to her time as a county auditor for Pierce County. She asked commissioners to show fiscal stewardship to the people the district serves.

“What these reports represent is a tremendous failure of fiscal responsibility, to be quite frank,” McCarthy said. “I want to personally ask you to follow your civic responsibilities to the public you serve. I appreciate your intent to do better in the future. I understand that you may feel taken aback by some of these findings. I think it is very disconcerting. However, it is your duty, like it is mine as an elected official, to know the law. It is your duty to establish appropriate internal controls, including oversight and review of your financial activity. That means, taking concrete steps to follow the law and ensure accountability for the use and safeguarding of public resources, as well as being transparent in district operations. As you know, there’s a high level of concern regarding your fire district. We will provide copies of these reports, as Megan alluded to, to the county Prosecutor’s Office and the Attorney General’s Office so they are able to review all of the information we have discussed today.”

Brian Snure, a Des Moines lawyer representing Fire District 12 who attended the meeting, said he appreciated the efforts of the Auditor’s Office. Snure said his advice to the board was to defer to the written responses the district provided to the reports.

“We will be addressing these issues as we move forward,” Snure said during the meeting. “We have provided a written response that summarizes the position of the board. The audit process is somewhat difficult for a board in this position to be able to fully respond to the audit because we’re not given a lot of time, nor a lot of space, nor a lot of the documents the auditor had to rely on this.”

“We do take this seriously,” Snure said. “I will be working with the district. We have on the agenda, this afternoon, potential hiring of an attorney to come in and assist with an investigation so they can fully comply with the audit reports and look into these matters. As the report indicates, they do believe a lot of this of the auditor found is misappropriation is not, but that’s why we’re going to do the investigation and we do take it seriously. So we will be moving forward to improve things and address the concerns of the auditor with the expectation that the concerns of the auditor were more reflective of the lack of documentation than what actually might have occurred.”

Commissioners unanimously approved a motion to authorize the district’s legal counsel to retain attorney Thomas Burke from Burke Law Offices in Des Moines to assist the district in investigating the allegations.

A member of the public asked whether commissioners would open it up for public comment or questions from the community. Commissioner Albert Wilder said, before ending the meeting, that they will leave it with their attorney’s statement at this time.

According to the state Auditor’s Office fraud report, Fire Chief pro tem Walsworth was responsible for managing the district’s financial operations, and Walsworth and her mother, former secretary Brenda Wilder, were responsible for preparing her own paychecks and her mother’s.

The auditor’s review of the district’s payroll from Aug. 1, 2018, to July 31, 2022, showed the fire chief misappropriated $23,337 and received $40,086 in questionable payments. The fraud report states Walsworth paid herself $2,973 in September 2019 for a vacation leave buyout, which was not authorized in her contract, and paid herself five additional paychecks in 2020 and three additional paychecks in 2021 for a total of $20,364. The report states she issued several paychecks months in advance of earning them, received $2,982 in unsupported payroll payments during employment and received $37,104 in payroll payments after her contract was terminated in May. The commissioners voted unanimously to dismiss Walsworth without cause at the April commissioners meeting, but then voted to keep Walsworth as fire chief pro tem in order to help the district transition to a new fire chief, although there has been no update on the search for a new fire chief.

Former secretary Brenda Wilder misappropriated $8,839 and received $5,115 in questionable payments, according to the report. It states Brenda Wilder received two additional paychecks in 2020 and three additional paychecks in 2021 for a total of $8,839 and upon resigning from employment with the district in March 2022, received a buyout for vacation and sick leave totaling $3,875, which was not adequately supported and received $1,240 in questionable pay after her resignation.

Commissioner Albert Wilder misappropriated $693 and received $10,100 in questionable payments, according to the report. Albert received three additional commissioners’ meeting paychecks totaling $693 for unknown purposes in 2020. He also received 10 questionable payments for a total of $10,100 and $5,709 was for maintenance services. The payments for maintenance services were not adequately supported to determine whether the work was performed, dates when the work was finished and how compensation was calculated.

Volunteer fire captain Bryan Walsworth received checks totaling $2,179 during 2020 that were not clearly supported and are considered questionable, according to the report.

The accountability audit and the fraud investigation reports can be found at sao.wa.gov, then type “Mason Fire District 12” in the search bar located in the upper right of the home page.